Guide to buying property in Austria

Transcription

1 Guide to buying property in Austria

2 Contents Procedure for Purchasing Property 2 Property and Usage Rights 3 Financing 5 Taxes 6 Due Diligence 7 Protection of the Buyer 8 Protection for the Vendor 8 Attorney, Notary Public, Transaction 9 Land Registry 10 Court 11 Real Estate Agent 11 Lease Contracts 11 Contacts 12 Procedure for Purchasing Property Buying property in Austria should be relatively straightforward but we would always recommend that you engage the services of a reputable agent who can assist with understanding the Austrian tax and legal structure, finding a suitable financial institution and eventually managing your property investment. This document has been compiled as a guide for potential purchasers of property in Austria. It does not seek to provide or replace legal advice which you should obtain, nor is it intended to have any contractual effect. 2 Guide to buying property in Austria

3 Property and usage rights Are individuals allowed to acquire outright ownership of real estate? Generally yes. However, acquisition of farmland is restricted in most of Austria s nine federal states. Some states prohibit the purchase of real estate in certain zones when the property will not serve as the owner s permanent residence. Do restrictions exist for foreigners in the acquisition and use of property or other real estate rights? Citizens of EU member states are entitled to acquire property without restrictions. Non-EU member state citizens generally need permission by the governing authority to acquire real estate, which can be granted if foreign investors prove social or economic interest. Certain corporate structures may allow for acquisition without the need for special permission. Can various sections of a building have different owners? Yes. There are two ways for different owners to acquire various sections of a building: a) The co-ownership without exclusive ownership of an exact part of the building b) Exclusive ownership as a condominium (Wohnungseigentum) of a defined part of the building Apart from outright real estate ownership, what other interests and usage rights are commonly created in real estate? Apart from real estate ownership, simple tenancy agreements and property leasing, legal concepts of dividing the property in real estate and built property (Superädifikat) as well as building leases (Baurecht) are common. Furthermore, servitudes (easements) can be created in real estate. A distinction needs to be made between land servitudes and personal servitudes, including but not limited to, the right of use and the right of residence, usufruct. Guide to buying property in Austria 3

4 Austria 4 Guide to buying property in Austria

5 Financing Is it possible to mortgage the real estate for financing of the purchase? Yes, especially as the Austrian real estate market has proven over the last six decades to be very stable, have low volatility and constant growth rates; banks are interested in financing real estate acquisitions. Mortgages on real estate as well as on buildings on third-party land and building leases may be registered in the Land Register on the basis of a written and notarised mortgage deed in order to become legally enforceable. Real estate transactions are usually handled via an attorney or a notary public. The financing bank will provide the fiduciary with the purchase sum upon signature of the mortgage deed. The attorney/notary will disburse the money upon receipt of the necessary documents to register the mortgage and the registration of the buyer s ownership. Are banks and other lenders prepared to finance the purchase of any type of acquired right? What percentage of the cost of purchase is usually regarded as the maximum that may be financed? What are the major terms and other conditions? Banks and other lenders usually offer long term loans: 20+ years for residential properties 12+ years for commercial properties The interest rate is usually defined by the three month European Libor (Euribor) plus a margin for the bank. Typical margins for residential properties are: 1-2% for residential properties 2-3% for commercial properties Do banks impose special financing conditions for non-resident investors? The financing conditions for non-resident investors depend on their general rating and creditworthiness. In general conditions will be the same as for residential investors. What are the costs of entering into and registering a mortgage loan? Bank fee of approx. 1% of the loan amount, subject to negotiation with the bank Court registration fee 1.2% of loan amount Notary fee between 100 and 500 In general, banks and lenders accept mortgages as a loan security. Banks will, in addition to the purchase of real estate, also finance the acquisition of property rights in buildings on third-party land or in building leases. The percentage of financing varies with the type of property: For residential properties banks will finance up to 80% For commercial properties banks will finance up to 60% Guide to buying property in Austria 5

6 TAXes Are purchases subject to taxation? What is the tax rate? VAT: Real estate purchases are generally not subject to VAT and especially if the property is the buyer s main private residence. In certain circumstance the buyer may opt for VAT, for example if the buyer wishes to rent out the property. In this case the VAT is fully refundable. Capital Gains: Since 2012 the sale of real estate is subject to a new tax on Capital Gains from real estate transactions (Immobilienertragsteuer). The sale of real estate is subject to taxation, whereby a special tax rate of 25% of the profit generally applies. Several exemptions from this tax exist, for example, if the owner uses the property as their main private residence (Hauptwohnsitz) for at least two consecutive years, any capital gains would be tax exempt. Real Estate Transfer Tax (RETT): Each transfer of real estate is subject to a RETT (Grunderwerbsteuer) of 3.5% of the purchase price (2% if parties are spouses or ascendants and descendants). Land Register Fee: The fee for the registration with the Land Register is 1.1% of the purchase price. Is the tax also applicable where a real estate company is purchased, instead of the real estate right? Is it possible to avoid such taxes? The transfer/acquisition of shares in a real estate company do not trigger a RETT (Grunderwerbsteuer) and Land Register fee as long as not all of the company shares are concentrated in one single shareholder/ person. Therefore any share deal where there is more than one shareholder is not subject to a RETT. Even the acquisition of a 100% participation in a real estate company triggers a RETT at a lower tax amount than in the case of an asset deal, as the 3.5% tax rate is calculated with the standard tax basis (Einheitswert) of the respective property. This standard tax basis is significantly lower than the market value of such property. In case of a property sale by foreign investors, is the profit subject to tax? The profit derived from a real estate transaction by an individual person is subject to 25% tax. The profit derived from a real estate transaction by a foreign legal entity is taxed on the basis of the Corporate Income Tax rate of 25% (exceptions may apply). This, however, only applies if Austria has tax jurisdiction, which has to be determined according to the circumstances of the case and the relevant Double Taxation Conventions. For example, profits derived from the sale of shares can be (depending on the seat of the foreign entity) fully exempt from tax. Do foreign investors have to pay taxes for rental income in Austria? Yes, the investor must pay Income Tax (or Corporate Tax if a company) and file a tax form on a yearly basis. Double Taxation Conventions apply. In general the effective taxation of rental income is very low as only the profit of the rental income is taxed. For example: An investor may expect from residential property a yield of 3% on an investment of 1million. This would result in a yearly net rental income of 30,000 p.a From this income the investor may deduct a tax free amount (Abschreibung) of at least 1.5% of the buildings value as well as the interest paid for the mortgage (let us assume another 1%). Sample calculation: Income 30,000 Tax free amount 15,000 Bank Interest paid 10,000 = Taxable profit 5,000 25% Tax 1,250 From the example above the legal possibilities of reducing the taxable profit on the basis of the effective taxation of income derived from rental income can result in a tax burden of less than 5% of the income. Is the ownership or usage of real estate subject to local property taxes? Yes, local land tax applies (Einheitswert) depending on the kind of property and based on an assessed value. These taxes and fees are approx. 0.1% per annum of the market value. 6 Guide to buying property in Austria

7 Due Diligence Can prospective purchasers inspect the relevant documents at the Land Registry in order to check the property title and any encumbrances? Yes, the Land Register is open to the public; the current status of the register and historic entries are available. Furthermore, each document on which an entry was based may be obtained. Courts, law firms and notaries have electronic access to the Land Register and the associated document archives. Can prospective purchasers ask the relevant planning and building regulation authorities for permission to inspect the documents showing whether and under which conditions the construction permit was granted? Are they granted access to the owner s correspondence with the authorities? It is possible to access the relevant planning and building regulations. The supervising or regulatory authority is the municipality where the real estate in question is located. To receive the required information, however, prospective purchasers need the current owner s permission in writing. Are there any other issues or conditions related to a property that should be analysed and where can these be checked? It is important, especially for foreign investors, to evaluate the applicable requirements regarding the regulations of real estate acquisitions by foreigners and the purchase of farmland. The federal district authorities are knowledgeable in these matters. Furthermore, the applicable land use regulations (Flächenwidmungsplan) should be reviewed with the supervisory municipality.

8 Protection of the buyer What legal formalities have to be fulfilled for transfer of title in real estate rights or hereditary building rights? The transfer of a property requires two steps disposition and execution. The title may be either a notarised sale purchase contract or an official document, for example a court order in case of an inheritance. The necessary method is the registration with the Land Register. Is it possible for purchasers to ensure at an early stage (i.e. prior to the due diligence) the acquisition of the estate (e.g. by entering into a provisional contract)? Yes, this is possible by signing a provisional contract and registering a priority notice (Rangordnungsbeschluss) with the Land Register. Generally speaking, only the holder of this order is entitled to register changes with the Land Register for a period of one year after issuance of the order. How can the rights to the property be fully protected against third party intervention? Any right in rem regarding real estate has to be granted by the owner of the property and registered with the Land Register, which is only made possible by a notarised document. The registered owner has to be informed of changes in the Register and will, in case of unlawful activities, be entitled to appeal against the decision of the court forming the basis of the entry. Furthermore, the owner may take legal action in order to defend their property against unlawful third party intervention (e.g. intrusion). Protection OF the Vendor How can vendors ensure that their real estate rights are secured prior to receiving full purchase payment? Usually, a notary or an attorney is appointed as Fiduciary to handle the transaction. The property of the purchaser will be registered with the Land Register only if the payment has been transferred to the Fiduciary. To what extent can vendors protect themselves from being held liable for defects in the sold property? Usually, the vendor warrants for the property to be free of liens and encumbrances, but does not warrant for any special conditions or characteristics of the object. Liabilities of the vendor may be waived in the purchase agreement to the extent allowed by mandatory law. This, however, depends on the circumstances of the case, and whether one or both parties to the purchase agreement are entrepreneurs or not. 8 Guide to buying property in Austria

9 Attorney, Notary, Transaction Is a notary required for a real estate transaction? Foreign buyers should always be aware when doing business in Austria, that although agreements on the purchase of real estate may even be concluded orally, in order to duly register the contract, a written and notarised document has to be filed with the supervisory court handling the Land Register. However, the role of the notary (which can be freely chosen) may be limited to the notarisation of the signatures. The transaction itself can be handled by an attorney or a notary. Who takes care of the transaction? In Austria the whole transaction of transferring a real estate property (due diligence, drafting the contract, issuing transfer tax declarations, handling the escrow including fiduciary service for the banks involved, registering the property) is done either by an attorney or a notary. In Vienna, both professions are highly regulated; regarding the safety of escrow amounts, both professions have mandatory insurance. In case of attorneys-at-law the transaction has to be executed according to the escrow statute of the Viennese Bar Association ( Elektronisch Anwaltliches Treuhandbuches der Rechtsanwaltskammer Wien ) where the escrow amount is even insured against fraud. What are the costs of a transaction? The fees depend on the purchase price and on the services provided by the attorney/ notary in connection with the real estate transaction which range from notarisation of the signatures, drawing up of the contract to being a fiduciary. Notary/attorney fees are prescribed by law but are negotiable - usually they are 2-3% of the purchase price plus 20% VAT for drawing up of the contract. Who pays the costs of the transaction? The parties to the contract need to agree on this. In most cases, however, the buyer pays the applicable costs, fees and taxes. Guide to buying property in Austria 9

10 Land Registry What is contained in the Land Registry? The Land Register, which is an official electronic database, contains three sections for each real estate listed: Section A: Register of real estate lots and registration numbers; Section B: Register of owners of these real estate lots; Section C: Register of mortgages and other encumbrances; Section A describes the estate, its covered area and the allowed use according to public law as well as the postal address. It also states restrictions according to public law and rights in rem the owner of the property has towards the owners of other specified lots. Section B holds information on the owner(s) of the real estate. Section C contains information on mortgages and other encumbrances inherent to the respective real estate. In addition to these three sections, all documents on which a registration was based, are collected by the Land Register and open to the public. Can purchasers rely on what is contained in the Land Registry? Yes, the Land Register entries are deemed to be legally correct.

11 Court Is the court involved in the acquisition of real estate rights? Yes. The Land Register is maintained by the district court which has jurisdiction over the property in question. Transactions in real estate property can only be conducted by means of an application to the supervising court. If yes, what would be the total applicable court fees? The applicable court fee amounts to 1.1% of the purchase price. Additionally, a lump sum fee of 45 is to be paid for each application. Real Estate Agent What is the function of an agent in a real estate transaction? The function of an Austrian agent is to establish contact between the vendor and the (prospective) buyer and to mediate between them. They support the negotiations and provide the buyer with the necessary information on the property and conditions of the purchase. What is the usual commission rate for real estate agents? What formalities must be observed before the commission becomes due? The usual commission fees are: Vendor - Up to 3% of the purchase price plus 20% VAT Buyer - 3% of the purchase price plus 20% VAT Generally, in the case of a purchase of substantial properties, agents are flexible regarding their commission. The commission fee is generally due upon signing of the purchase contract. Lease contracts Is it legally possible to conclude longterm lease contracts securing a return of investment (e.g. 15 years)? Yes, this is possible. Long term lease contracts are usual in Austria. Are long-term lease contracts safe? Under what conditions may the lessee terminate a long-term lease contract? The conditions under which the lessee may terminate a long term lease contract (such as notice period, termination date and/or waiver of termination right), should be stipulated in the lease contract otherwise the following legal stipulations apply: For office and commercial leases, three months notice period with a termination date at the end of the quarter For residential leases, three months notice period with a termination date at the end of the month In special cases (e.g. non-performance, or if the leased asset is destroyed or essentially damaged) the contract may be terminated immediately. For residential leases, special rules protecting tenants usually apply. Are there any specific requirements for the form of long-term lease contracts that have to be observed to make them enforceable (e.g. registration)? No specific form is required. Long-term lease contracts do not have to be registered with the Land Register. Does the purchaser of an outright ownership of real estate enter into an existing lease contract of the seller? Yes. Can lease agreements be registered with the Land Registry and thereby be protected from third party intervention? Yes lease agreements for a limited period of time, life time lease agreements and lease agreements for an indefinite period of time (during which the right of termination was waived) may be registered. Have lessees any precedent rights over a property in a sale scenario? In a sale scenario, lessees have no precedent rights. Is it possible to agree on such precedent rights by contract? Yes, for example pre-emption rights may be granted and registered with the Land Register. How long does it take to evict a lessee in a case on non-payment of rent? Depending on the contract, it generally takes between six months and a year to evict a lessee. Guide to buying property in Austria 11

12 contacts Alex Koch de Gooreynd International Residential, Knight Frank LLP T E alex.kdeg@knightfrank.com Richard Buxbaum Otto Immobilien T E r.buxbaum@otto.at Helmut W. Seitz Hasberger-Seitz & Partner T E KnightFrank.com Important Notice 1. No reliance on contents: This is only a guide to the buying process in Austria. It is not definitive and is not intended to give advice. It must not be relied upon in any way. So far as applicable laws allow, no responsibility or liability whatsoever will be accepted for any errors or for any loss or damage resulting from any use of or reference to the contents. As a general overview prepared using information from Helmut Seitz, an Austrian Lawyer, this guide does not necessarily represent the view of Knight Frank in any respect. 2. Independent advice: You must take specific independent advice from your professional advisers in all cases. In preparing this guide, we do not imply or establish any advisory or professional relationship. We do not have any relevant authorisation from the Financial Services Authority to undertake regulated activities. 3. Intellectual property: Knight Frank LLP All rights reserved. Copying, modification or reproduction of this review in whole or in part is not permitted without the prior written approval of Knight Frank LLP. 4. General: Knight Frank LLP is a limited liability partnership registered in England with registered number OC Our registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of members names. 5. Members of the Knight Frank Global Network: References to Knight Frank may be to, or include, any Member of the Knight Frank Global Network. Those Members are Knight Frank LLP and its direct subsidiaries which provide services in the UK and an international network of separate, distinct and independent entities or practices which provide services internationally. No Member has any authority to bind or represent any other Member. No Member operating under the name of Knight Frank (including Knight Frank LLP) is liable for the acts or omissions of any other Member.